NEW DIRECTIONAL CALL PLAYS
Huntington Ingalls Industries - HII - close: 131.45 change: +3.96
Stop Loss: 125.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 318 thousand
Entry on November -- at $---.--
Listed on November 16, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: Yes, see below
Defense stocks were in the spot light today. The tragic terrorist attack in Paris on Friday has changed the worldview for many governments. Most major world powers have vowed to intensify their efforts to destroy ISIS. That should mean additional defense spending.
HII is in the industrial goods sector but it's part of the defense industry.
According to the company,
"Huntington Ingalls Industries is America's largest military shipbuilding company and a provider of engineering, manufacturing and management services to the nuclear energy, oil and gas markets. For more than a century, HII's Newport News and Ingalls shipbuilding divisions in Virginia and Mississippi have built more ships in more ship classes than any other U.S. naval shipbuilder. Headquartered in Newport News, Virginia, HII employs approximately 37,000 people operating both domestically and internationally."
The earnings picture has been mixed for HII. The market was relatively forgiving with the company's most recent earnings report. HII announced its Q3 results on November 5th. Earnings were up +18.5% from a year ago to $1.98 a share. That actually missed Wall Street estimates by three cents. Revenues were up +4.8% to $1.8 billion, which was above expectations. HII said their total operating margin improved from 10.0% to 11.1%. Management also said their backlog grew about $800 million to $23.3 billion.
The stock reacted sharply with a surge to new multi-month highs. Since this earnings report HII has been digesting its gains in a sideways consolidation pattern. Friday's market decline pushed HII to short-term technical support at the 10-dma. Today shares bounced +3.1% to set a new six-month closing high. We think this rally continues. The point & figure chart is bullish and forecasting a long-term target of $179.00. (Our time frame is only a few weeks)
Tonight we are suggesting a trigger to buy calls at $131.75.
FYI: HII will begin trading ex-dividend on November 24, 2015. The quarterly cash dividend is $0.50.
Trigger @ $131.75
- Suggested Positions -
Buy the DEC $135 CALL (HII151218C135) current ask $2.85
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike